Pritchard's explanation makes for good copy, but does not pass the Mish "smell test". If Tsipras really wanted to lose, he would have made a lukewarm endorsement for 'no'. Instead, he threw every word in the book at Germany including a demand for Nazi war reparations while making overtures with Russia.

Arrogance

I don't accept Pritchard's explanation. To directly campaign, and campaign exceptionally hard, for an outcome one does not want makes no sense.

Instead, I offer a simpler explanation: Tsipras is an arrogant fool. He had far too much confidence in his own ability to make the world see things his way.

Stupidity alone does not provide the answer, but an amazing amount of arrogant belief in oneself to the bitter end, that Germany would eventually bow down and kiss his feet is the likely answer.

Humiliation

Tsipras has humiliated himself while destroying any hope Greeks had. He refused to resign and it's highly likely his coalition splinters to smithereens in short order.

It would be best for Greece if it splinters now, but the likeliest outcome is the coalition busts apart after the Greek parliament votes for servitude and pledges €50 billion in assets.

The statement merely requires that they be “valuable.” After six years of recession and counting, Greek liquid assets are scarce; presumably hard assets like beautiful Islands and national treasures are off limits. One likely source of said assets are the new bank shares that the Greek government will acquire with the money it will borrow from the eurozone’s bailout fund to recapitalize the country’s banks.

Islands off limits? We will see. Greek banks are not worth €50 billion for sure. In fact, they are bankrupt, with negative worth. Ten years from now will they be worth something? What about airlines, airports, bus terminals, and electrical companies?

The Journal did not state so but any infrastructure assets owned by the government will surely be on the block.

Defeat Snatched From Jaws of Victory

The Financial Times reported the deal nearly fell through at 6:00AM this morning when after 14 hours of negotiation, when both Merkel and Tsipras headed for the door.

A few things that many of us took for granted, and that some of us believed in, ended in a single weekend. By forcing Alexis Tsipras into a humiliating defeat, Greece’s creditors have done a lot more than bring about regime change in Greece or endanger its relations with the eurozone. They have destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union.

In doing so they reverted to the nationalist European power struggles of the 19th and early 20th century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order.

On Saturday, Wolfgang Schäuble, finance minister, insisted on a time-limited exit — a “timeout” as he called it.

I have heard quite a few crazy proposals in my time, and this one is right up there. A member state pushed for the expulsion of another. This was the real coup over the weekend: not only regime change in Greece, but also regime change in the eurozone.

The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident — and there are still many things that could go wrong, both in Greece and in other eurozone parliaments. Any other country that in future might challenge German economic orthodoxy will face similar problems.

This brings us back to a more toxic version of the old exchange-rate mechanism of the 1990s that left countries trapped in a system run primarily for the benefit of Germany, which led to the exit of the British pound and the temporary departure of the Italian lira.

What should the Greeks do now? Forget for a moment the economic debate of the past few months, over issues such as the impact of austerity or economic reforms on growth. Instead ask yourself this simple question: do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?

Previously, the strongest argument against any forecasts of break-up has been the strong political commitment of all its members. If you ask Italians why they are in the eurozone, few have ever pointed to the economic benefits. They wanted to be part of the most ambitious project of European integration undertaken so far.

"We will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable".

But if you take away the political aspiration, you may end up with a different judgment. From a pure economic point of view, we know that the euro has worked well for Germany. But for Italy, it has been an unmitigated economic disaster. The country has seen virtually no productivity growth since the start of the euro in 1999. If you want to blame the lack of structural reforms, then you have to explain how Italy managed decent growth rates before then. Can we be sure that a majority of Italians will support the single currency in three years’ time?

Once you strip the eurozone of any ambitions for a political and economic union, it changes into a utilitarian project in which member states will coldly weigh the benefits and costs, just as Britain is currently assessing the relative advantages or disadvantages of EU membership. In such a system, someone, somewhere, will want to leave sometime. And the strong political commitment to save it will no longer be there either.

Final Thoughts

In my opinion, that is the best article Wolfgang Münchau has ever written.

Like Economist Paul Krugman, and unlike myself, Münchau was a strong supporter of the eurozone "project".

I maintain that the eurozone has too many flaws to possibly work. That Tsipras caved in at the last moment changes nothing, and it even appears that Münchau has come to grips with that reality.

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